How SaaS CFOs use financial data to boost profits

For many people, finance could be mistakenly viewed as playing a passive, historical role in the company. A common misconception thinks it is about number-crunching and accurately reporting past transactions and financial events.

To a certain extent, this is true. But there’s so much more that this team contributes. Finance can become an incredible profit driver when handled proactively and strategically. Equipped with automation, your SaaS accounting department can provide unparalleled insight into your SaaS metrics and other critical areas to grow the business, to give a shared consciousness to the executive team, and to impress investors.

This article will help you see finance in an entirely new light. Let’s get started.

Efficiency: The numbers don’t lie

Optimizing the capital efficiency of your company should be at the top of your priority list as a SaaS CFO. Spotting efficiency trends in your company’s financial data and forming strategies to boost profits based on that data is an integral part of what CFOs do.

When it comes to tracking and improving your long-term efficiency, three metrics stand above the rest:

• Customer acquisition cost: Your customer acquisition cost (CAC) is an averaged measurement of how much each customer costs you to acquire. Modern accounting software can help you get the most out of your CAC tracking because it allows you to plug in different strategic variables and analyze their long-term financial impact.

• Customer lifetime value: Your customer lifetime value (CLTV) measures how much money your customers spend with you before parting ways. One of the most critical responsibilities of a CFO is to constantly increase this SaaS metric.

• Net dollar retention: This metric shows you the monthly or annual percentage by which your revenue has grown or shrunk from your existing customer base. A positive percentage for your net dollar retention rate would indicate new signups, cross-sells, or upgrades. A negative percentage would point to higher churn rates or subscription downgrades.

For maximal efficiency, your goal is for each customer to cost less and less to acquire while also spending more money on your company’s products. Your CAC covers the first part of that, and your customer lifetime value (CLTV) accounts for the second half.

Hiring to solve areas of concern

Many SaaS companies are in a similar situation at various points on their business journey. Everyone can tell that something is off: the company has entered a lull, and you’re at a crossroads where it will either get resolved or get even worse.

At times like these, the natural choice is often to solve the issue with some kind of outside hire. A fresh perspective and a new set of skills can do wonders in getting a SaaS company out of these awkward slumps and back to a strong performance.

Hiring is simple and seamless for companies that understand the importance of finance and accounting. All these groups will need to do is examine their financial data to identify the exact areas where they’re hurting and devise a specific hiring plan based on that information.

Here’s what it boils down to: you can’t make an effective hire to solve a problem unless you know with total certainty what the problem is. This is one of the many reasons why savvy SaaS companies keep track of their essential data with cloud-based accounting software.

Stories exist on building the forecast out 1+ years to have the confidence to hire ahead of plan and tackle customer requests in the product to reduce churn 2% and subsequently increase Enterprise Value by millions of dollars.

Automation: fewer problems, more opportunities

Automation is one of the most powerful forces in business. It’s the “secret weapon” that often separates companies that are true powerhouses in their industry from those that are simply good at what they do.

Equipping your accounting department with a modern automation suite will enable your team to achieve more in less time while utilizing fewer resources.

More specifically, you’ll be able to:

• Double down on your winners: Instantly see which products and customer segments outperform the rest so you can do more of what’s working and scale back or eliminate what isn’t.

• Pivot quickly and effectively: The mark of great leaders (including SaaS CFOs) is being able to spot when a plan isn’t working and change course so gracefully that people barely notice. Automation can help you minimize turbulence during times of transition.

• Stop emailing data back and forth: Be honest. Don’t you send enough daily emails without adding inter-departmental data transfers to the list? With cloud-based accounting software, everyone can access the exact data they need at a moment’s notice. No emails are required.

• Spot problems before they occur: Accounting software allows you to track and analyze small changes in client accounts over long periods. This is extremely valuable in spotting any troubling trends with clients before they develop into full-scale problems that harm your business.

SaaS subscription accounting software is much more than just another purchase for the office. It’s a strategic investment in your company’s long-term growth and profitability.

Unlock your team’s full potential today

Hopefully you agree by now that SaaS finance is a gateway to higher profits and a fully optimized business. If you still need to be convinced, click here to see how Sage Intacct is helping SaaS companies achieve massive growth in record time.